Stephen Bartrop says underground coal gasification can be seen as the overlooked younger brother of coal seam gas.

The LimeStreet Capital resources fund manager says while coal seam gas has become one of the biggest stories in the resources sector in the past three years, the versatile and efficient underground coal gasification (UCG) process is starting to emerge from its shadow.

''They do share similarities but while everyone knows about coal seam gas, you mention UCG and people ask, what's that?'' Mr Bartrop says. ''Those who have come across underground coal gasification often say 'we have seen some pilot plants work, conceptually it looks good but there are still some question marks hanging over its head until it is commercialised'.

''However given that for one cubic metre of coal you get 20 times the amount of energy out of a coal seam through UCG than through coal seam gas technology it really is just a matter of time before it comes into its own which will have huge implications on Australia's vast coal fields.''

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The coming of age for underground coal gasification has been lengthy. The technology was developed in the 19th century and encouraged in the Soviet Union under Joseph Stalin.

The process works by injecting oxidants down a production well and over non-mined coal seams. The combustion effect results in gas, which is transported up a second well where it can be used as a fuel, a chemical feedstock or for power generation.

The managing director of Cougar Energy, Len Walker, a pioneer of UCG in Australia, says energy demand has put the technology in play.

''When I founded Linc Energy in 1996, or even when I founded Cougar more than two years ago, there was very limited interest in UCG,'' he says. ''There was also very little going on overseas at the time. Apart from Linc Energy, Carbon Energy and ourselves, which are the big three in the space, I have counted six or seven other listed companies that have recently popped up and which are all promoting UCG in different ways.

''I have never seen anything like it in the 30 years that I have been involved in UCG. The genie is out of the bottle and it is unlikely to be put back in again.''

An important difference between underground coal gasification and coal seam gas is that while the latter is produced for conversion into liquefied natural gas and the export market, the former is aimed at providing supply for domestic use.

''It would take far too much effort to convert underground coal gasification for export,'' Dr Walker says. ''Everyone can see energy prices going up but if we can bring this to market, and clearly I am a firm believer in that eventuating, then we will be underpinning the price of gas in Australia.''

Last month Cougar announced ignition of its flagship Kingaroy project in central Queensland and the successful production of synthetic gas (or syngas).

The company will soon undertake trials, underground and at the surface, which will be used for a pre-feasibility study and subsequent bankable feasibility. The composition and variability of the gas will determine the final design for Cougar's planned 400-megawatt power station, producing enough energy to power 400,000 homes for at least 30 years. Dr Walker hopes to secure $300 million in combined debt and equity funding by early next year to go towards Cougar's 200-megawatt stage one project, which is due to be completed by 2013.

Travel about 125 kilometres south-west of Kingaroy and you will find Linc's Chinchilla project, which has a slightly different take on UCG. It uses the process to convert coal to liquids which it has been doing for about 10 years. The company has a goal of producing 20,000 barrels a day, the equivalent of 10 per cent of Australia's fuel consumption.

Linc's chief executive, Peter Bond, said the company was looking at branching into power generation.

''What UCG is eventually used for is really driven by geography. So in Vietnam, for instance, power is in short supply so you wouldn't do anything else but power,'' he said. ''We are hopeful of putting in a power station in South Australia, which is being pushed through at a rate of knots because South Australia is really short on power supply. That would be a 200- to 400-megawatt commitment with construction to start by the end of next year.''

The neighbour to Linc's tenements in the Surat Basin is Carbon Energy. Having completed its pilot burn just over a year ago, Carbon Energy is targeting a 5 megawatt plant to be operational by midyear, the first of its kind in the world.

Andrew Dash, Carbon Energy's managing director, says the company may then be ready to announce plans for a 20- to 25-megawatt power station which would take 18 months to build.

''We are in discussions with potential partners now who will take power from the plant but also look to own the power station and we would sell gas into that,'' he says. ''Hopefully those prospective partners will join us for the 20-megawatt plant but also the further 300-megawatt upgrade.''

Last month, the private equity fund Pacific Road Resources Fund said it would take a 10 per cent stake in the company by acquiring the CSIRO's interest. The company owns the intellectual property rights to CSIRO's underground coal gasification technology. Pacific Road will become Carbon Energy's second largest shareholder behind Incitec Pivot, which owns 11.3 per cent. Incitec's involvement indicates that Carbon Energy may also produce ammonia as well.

All three men believe underground coal gasification is going to be the next big thing. Just as other unconventional gases - like coal seam methane and shale gas - were once viewed as difficult and niche resources, they say underground coal gasification will find its place.

A new generation of underground coal gasification companies are emerging. From Regal Resources, which is testing Victoria's potential with a pilot plant in the You Yangs, to Clean Global Energy, which has plans to develop a commercial underground coal gasification project in Mongolia, the market is growing.

The market's appetite will be tested over the next 18 months to two years as projects try to secure finance to make their visions a reality.

Do not be surprised if underground coal gasification is spoken about with the same wonder which commentators have expressed at the growth of the once unpopular coal seam gas, now seen as the darling of the Australian resources industry.